Virgin Media 2010 Annual Report Download

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Virgin Media
Annual Report 2010

Table of contents

  • Page 1
    Virgin Media Annual Report 2010

  • Page 2
    ... new HD channels. We continue to leverage our mobile offering by marketing to our cable customers and introducing a number of new high-end handsets. As a consequence, our mobile contract base increased by 27% to 1.2 million contract customers by the end of the year. This helped Mobile revenue return...

  • Page 3
    ... Suite 2863, New York, New York (Address of principal executive offices) 10022 (Zip Code) (212) 906-8447 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share NASDAQ Global Select Market Indicate by...

  • Page 4
    ...annual report on Form 10-K, unless we have indicated otherwise, or the context otherwise requires, references to "Virgin Media," "the Company," "we," "us," "our" and similar terms refer to the consolidated business of Virgin Media Inc. and its subsidiaries (including Virgin Media Investment Holdings...

  • Page 5
    ... rate fluctuations; our reliance on third parties to distribute our mobile telephony products; the functionality or market acceptance of new products; tax risks; our reliance on Everything Everywhere to carry our mobile voice and non-voice services; the ability to effectively manage complaints...

  • Page 6
    ...Virgin Media Investment Holdings Limited and Virgin Media Investments Limited VMIH is a company incorporated in England and Wales, with its registered office at 160 Great Portland Street, London W1W 5QA, United Kingdom. The registered office for VMIH will be changing on March 31, 2011 to Media House...

  • Page 7
    ... to Virgin Media Investment Holdings Limited; NTL Cable PLC, the issuer of our public bonds, to Virgin Media Finance; NTL Group Limited, a principal operating subsidiary, to Virgin Media Limited; NTL Communications Limited to Virgin Media Communications Limited; and NTL Holdings Inc. to Virgin Media...

  • Page 8
    ...On October 1, 2009, our common stock was admitted to the Official List of the Financial Services Authority and commenced secondary trading on the main market of the London Stock Exchange under the ticker symbol "VMED." We did not issue any new common shares in connection with our London listing. The...

  • Page 9
    ... sport and movie channels in high definition on our cable television service. Our internal reporting structure and the related financial information used by management and the chief operating decision maker reflect changes we have made after the announcement of the sale of Virgin Media TV. Following...

  • Page 10
    ..." entertainment set-top box which brings together television, on-demand and web services through a single set-top box and unique content discovery and personalization tools. The Virgin Media TV powered by TiVo service is being rolled out to customers during 2011. Financing On January 19, 2010...

  • Page 11
    ...to our cable customers and seeking to grow our Business segment revenues through a focus on managed data services. Available Information and Website Our principal executive offices are located at 909 Third Avenue, Suite 2863, New York, New York 10022, United States, and our telephone number is (212...

  • Page 12
    ..., games, movies and television programming. We also offer an online gaming channel. In January 2010, we also launched a music channel offering streaming video content. Our customers are also able to access their email accounts and customer care information through our website. We generate revenue...

  • Page 13
    ..., Future Entertainment Sarl, trading as Virgin Media Entertainment. We offer a free-to-air digital television service, or Free TV, to certain customers on our cable platform. Our Free TV service provides access to approximately 45 linear channels and radio services such as Dave, E4, Yesterday, Sky...

  • Page 14
    ... new TiVo service, combined with the existing VOD service, make available approximately 4,600 hours of television shows, movies and music videos. Fixed Line Telephony We provide local, national and international telephony services to our residential customers on our cable network. We offer a basic...

  • Page 15
    ...to non-cable customers via BT's local access network. As of December 31, 2010, we provided non-cable fixed line telephone service to approximately 169,600 subscribers. Marketing and Sales Our consumer strategy focuses primarily on marketing bundled offerings of products and services across our "quad...

  • Page 16
    ... customers to migrate to new technologies gradually. Data and Internet Services Converged Solutions Converged solutions use a single network to transport voice, data and video, allowing our customers to benefit from cost synergies. Additionally, we offer services such as IP virtual private networks...

  • Page 17
    ... of the different types of service providers. Specialized account and service management teams support carriers, mobile operators, SIs and ISPs. We provide predominantly data connectivity services, both in terms of local access and core networks, including high bandwidth connections between a site...

  • Page 18
    ...small number of key partners. Competition Consumer Segment We face intense competition from a variety of entertainment and communications service providers, which offer comparable broadband internet, television, fixed line telephony and mobile telephony services. In addition, technological advances...

  • Page 19
    ...a strategy of discounting its bundled packages of fixed-line, broadband and TV. British Sky Broadcasting Group plc. BSkyB, an established competitor in the pay television market, offers discounted triple- play bundles of broadband, television and fixed line telephone services. In 2010, BSkyB focused...

  • Page 20
    ... new free-to-air internet-connected TV service to U.K. homes. BBC and ITV also offer a free-to-air digital satellite alternative to Freeview DTT service, known as Freesat. Freesat offers approximately 90 subscription-free channels, including selected high definition channels such as BBC 1 HD, BBC HD...

  • Page 21
    ... and also the growth in online communication through Facebook and Twitter. These services generally offer free calls between users of the same service, but charge for calls made to fixed line or mobile numbers either on a flat monthly rate for unlimited calls (typically restricted to geographic...

  • Page 22
    ... regulator established under the Communications Act. The regulatory regime for on-demand programming is derived from the Audiovisual Media Services Directive. U.K. Regulatory Authorities The U.K. Office of Communications, or Ofcom, is the key regulatory authority for the communications sector in...

  • Page 23
    ... the help of public investment. We expect the tender process for these trials to commence in early 2011. We are playing an active role in helping Government and industry to understand how best this money might be spent to maximize the long term value of public investment in broadband networks. 20

  • Page 24
    ... Video On Demand Services We are required to hold individual licenses under the Broadcasting Acts 1990 and 1996 for any television channels (including barker channels) which we own or operate and for the provision of certain other services on our cable TV platform, such as electronic program guides...

  • Page 25
    ... entertainment at the heart of our sustainability strategy. Our key focus has been to use our digital technology to provide people with social benefits, for example, via our Virgin Media Pioneers Programme. We have also prioritised three other objectives: becoming a low carbon, low waste business...

  • Page 26
    ... use the "Virgin" name for the television, broadband internet, fixed line telephone and mobile phone services we provide to our consumer and business customers, and in connection with the sale of certain communications equipment, such as set-top boxes and cable modems. Our license agreements provide...

  • Page 27
    ... technological developments are increasing the number of media choices available to subscribers. In addition, continued consolidation within the media industry may permit more competitors to offer "triple-play" bundles of digital television, fixed line telephone and broadband services, or "quad-play...

  • Page 28
    ... for new products and services, including faster broadband speeds; install and maintain cable and equipment; and finance maintenance and upgrades. Our covenants in our senior credit facility effectively restrict our use of cash. If these covenants affect our ability to replace network assets at...

  • Page 29
    ... such service levels may be adversely affected. If we fail to meet our obligations under the license agreement, this could lead to a termination of the license. If we lose the right to use the Virgin brand, we would need to rebrand the affected areas of our business, which could result in increased...

  • Page 30
    ...premium subscription sports and film channels, respectively, available in the U.K. Ofcom conducted an investigation into the pay TV market and, in its Pay TV Statement of March 31, 2010, imposed new license conditions on BSkyB that provide for a must offer obligation on Sky and that regulate, or set...

  • Page 31
    ... services may be affected by an economic slowdown as customers reduce their expenditures on mobile phones and usage or consider a return to lower margin prepaid rather than contract accounts. Current cable customers may elect to downgrade their packages or move to other less costly providers. New...

  • Page 32
    ...Mb in limited geographic areas and our roll out in 2011 of a next generation set-top box and related services with TiVo. We are also increasing the amount of content available via our mobile telephony platform. There is no assurance that any new product or service that we may develop will perform as...

  • Page 33
    ... network to carry its communications traffic. Virgin Mobile relies on its agreement with Everything Everywhere for voice, non-voice and other telecommunications services we provide to our mobile customers, as well as for certain ancillary services such as pre-pay account management. If the agreement...

  • Page 34
    ... service and in our carriage of HD channels. Our current capacity limitations may affect our ability to carry new channels as they are developed. Moreover, our digital television offering could become less competitive, which could result in an increase in customer churn and a decrease in revenue...

  • Page 35
    ... into UK law, Ofcom may attempt to use the non-significant market power, or non-SMP, access provisions to require us to make available access to our network to third parties. Our ability to introduce new products and services may also be affected if we cannot predict how existing or future laws...

  • Page 36
    ... our available cash flow, our ability to obtain additional financing if necessary in the future, our flexibility in reacting to competitive and technological changes and our operations. We have a substantial amount of indebtedness. Our consolidated total long term debt, net of £222 million current...

  • Page 37
    ... the future that may contain financial or other covenants more restrictive than those applicable under our current indebtedness. We are a holding company dependent upon cash flow from subsidiaries to meet our obligations. Virgin Media Inc. and a number of its subsidiaries are holding companies with...

  • Page 38
    ... 30 trading days of 2010, holders of the convertible notes may elect to convert their convertible notes during the first quarter of 2011 and in future quarters if this condition is met. If conversions of this nature occur, we may deliver cash, common stock, or a combination of cash and common stock...

  • Page 39
    ...common stock could depress the trading price of the Company's common stock for a considerable period. Sales of the Company's common stock, and the possibility of these sales, could make it more difficult for the Company to sell equity, or equity related securities, in the future at a time, and price...

  • Page 40
    ...commercial, employee and employee benefits which arise in the ordinary course of our business. For instance, the U.K. tax authorities have challenged our Value Added Tax, or VAT, treatment of certain of our activities. Any challenge made could become subject to court proceedings. We currently expect...

  • Page 41
    ... 8.2 8.1 Future payments of regular quarterly dividends by us are at the discretion of the Board of Directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and stock repurchase programs. In addition, the terms of our...

  • Page 42
    ...our Board-authorized capital structure optimization program during 2010: Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Value of shares that May Yet Be Purchased Under the Program (in Pounds Sterling millions)(1) Period Total Number of Shares Purchased...

  • Page 43
    ...transaction that was accounted for as a reverse acquisition. The new holding company, Telewest Global, Inc., changed its name to NTL Incorporated on March 3, 2006. From March 6, 2006, share prices reflect the market price for that company, which was renamed Virgin Media Inc. on February 6, 2007. 40

  • Page 44
    ... Virgin Media Holdings Inc., and for the period since March 3, 2006, these financial statements reflect the reverse acquisition of Telewest. 2010 Year ended December 31, 2009 2008 2007 2006 (Adjusted) (Adjusted) (Adjusted) (Adjusted) (in millions, except per share data) Statement of Operations Data...

  • Page 45
    ... cable network were "triple-play" customers, receiving broadband internet, television and fixed line telephone services from us, and approximately 11.8% were "quad-play" customers. In addition, we provide a complete portfolio of voice, data and internet solutions to leading businesses, public sector...

  • Page 46
    ...of the Company a term loan A facility, or Tranche A, and a revolving credit facility, or the RCF. On April 12, 2010, a term loan B facility, or Tranche B, was added to the senior credit facility by way of an accession deed between Virgin Media Investment Holdings Limited and Deutsche Bank AG, London...

  • Page 47
    ... of common stock acquired in connection with these programs have been cancelled. The remaining amount authorized under this plan is £213.5 million ($333.0 million based on the exchange rate as at December 31, 2010). Revenue Our revenue by segment for the years ended December 31, 2010, 2009 and 2008...

  • Page 48
    ... and cash flows for the years ended December 31, 2009 and 2008. We have also entered into a number of agreements providing for the carriage by us of certain of BSkyB's standard and high-definition channels along with the former Virgin Media TV channels sold. The agreements in respect to the sale of...

  • Page 49
    ... compete and may use their dominance in those markets to offer bundled services that compete with our product offerings. As a result of increased competition, we have had to, and may be required to continue to, adjust our pricing and offer discounts to new and existing customers in order to attract...

  • Page 50
    ... and expanding our service offerings to existing customers in order to manage our churn rates. Our ability to reduce our churn rates beyond a base level is limited by factors like competition, the economy and, in respect of our cable business, customers moving outside our network service area, in...

  • Page 51
    ... of non-regulated product pricing, the market is increasingly price sensitive, particularly in the current challenging economic conditions. Operational Effectiveness. The extensive use of optical fiber in our access networks allows us to provide high-speed ethernet services directly to business...

  • Page 52
    ... on our long range cash flow forecasts. In estimating cash flows, we use financial assumptions in our internal forecasting model such as projected customer numbers, projected product sales mix and price changes, projected changes in prices we pay for purchases of fixed assets and services as well...

  • Page 53
    ... levels of competition and rates of growth (or decline) in the economy on a longer term basis could impact the valuation to be used in future annual impairment testing. The table below presents the goodwill and indefinite-lived intangible assets allocated to our Consumer and Business reporting units...

  • Page 54
    ...FASB ASC, in relation to connection and activation fees for cable television, as well as fixed line telephone and broadband internet services, on the basis that we market and maintain a unified fiber network through which we provide all of these services. Installation revenue in our Consumer segment...

  • Page 55
    ... 31, 2010, selling, general and administrative expenses increased by 0.5% to £790.6 million from £786.3 million for the year ended December 31, 2009. This increase was primarily attributable to higher marketing and employee and outsourcing costs, partially offset by lower facilities costs, bad 52

  • Page 56
    ... For the year ended December 31, 2010, depreciation expense increased to £987.7 million from £928.7 million for the same period in 2009. This increase was primarily as a result of increases in depreciation in respect of new fixed assets with relatively shorter lives, such as customer premises...

  • Page 57
    ... quarter of 2010, we rebranded our Business reporting unit with the Virgin trademarks. As a result, we recorded an impairment expense of £4.7 million for the year ended December 31, 2009 for the Telewest trademark. We performed our annual impairment reviews for our Business and Consumer reporting...

  • Page 58
    ... of higher cash balances over the period. Income Tax Benefit For the year ended December 31, 2010, income tax benefit was £124.1 million as compared with £2.5 million for the same period in 2009. The 2010 and 2009 tax benefit was comprised of (in millions): 2010 2009 Current: Federal ...State and...

  • Page 59
    ... sale of our Virgin Media TV business was £19.2 million, net of tax of £15.0 million. Income (Loss) On Discontinued Operations For the year ended December 31, 2010, the income on discontinued operations was £27.8 million compared with a loss of £7.5 million for the year ended December 31, 2009...

  • Page 60
    ...increased revenue from our mobile and non-cable product offerings. The increase in cable revenue was primarily due to selective telephony, broadband and television price increases, additional subscribers to our television, broadband and fixed line telephone services and increased number of customers...

  • Page 61
    ...quad-play" customers is significantly higher than the average cable ARPU. Non-cable revenue for the year ended December 31, 2010 increased to £77.2 million from £58.7 million for the year ended December 31, 2009. The increased non-cable revenue was predominantly driven by the new service offerings...

  • Page 62
    ...a net increase in products of 273,300. December 31, 2010 September 30, 2010 Three months ended June 30, March 31, 2010 2010 December 31, 2009 Opening customers(1) ...Customer additions ...Customer disconnects(2) ...Net customer additions ...Closing ...Cable churn(1)(3) ...Cable products: Television...

  • Page 63
    ... in contract customers reflects our strategy of using our own sales channels and cross-selling mobile contracts to our cable and non-cable customers. The decline in prepay customers reflects increased competition in the prepay market and our strategy not to focus heavily on retaining market share in...

  • Page 64
    ... services increasing to 61.0% at December 31, 2010 from 51.7% at December 31, 2009. December 31, 2010 Three months ended September 30, June 30, March 31, 2010 2010 2010 December 31, 2009 Opening customers ...Net customer additions ...Closing customers ...Opening Non-cable products: Telephone...

  • Page 65
    ... the year ended December 31, 2009. The increase was primarily due to the higher revenue, as described above, offset by higher marketing costs due to the rebranding to Virgin Media Business during the first quarter of 2010. Television Channel Joint Ventures We own 50% of the companies that comprise...

  • Page 66
    ... partially offset by reduced employee and outsourcing costs. Consumer segment cost of sales increased primarily as a result of increased costs of BSkyB's basic and premium TV services and the cost of wireless routers that we began selling to our residential customers during 2008, partially offset by...

  • Page 67
    ...2006 and the restructuring plan announced in 2008 (in millions): Historical Restructuring Accruals 2006 Acquisition Restructuring Accruals Lease Exit Costs Lease Exit Costs 2008 Restructuring Accruals Involuntary Employee Termination Lease and and Related Contract Costs Exit Costs Total Balance...

  • Page 68
    ... increased discount rate, a reduced terminal value multiple and reduced long term cash flow estimates. As a result, we recorded an impairment charge of £362.2 million in relation to this reporting unit in the year ended December 31, 2008. As at December 31, 2008, we performed our annual impairment...

  • Page 69
    ... interest rates and lower cash balances. Income Tax Benefit For the year ended December 31, 2009, income tax benefit was £2.5 million as compared with £6.8 million for the same period in 2008. The 2009 and 2008 tax benefit was comprised of (in millions): 2009 2008 U.S. state and local income tax...

  • Page 70
    ... we received refunds of £1.3 million in respect of pre-acquisition periods of Virgin Mobile, and we paid £0.1 million in respect of U.S. state and local taxes in 2008. Loss From Continuing Operations For the year ended December 31, 2009, loss from continuing operations decreased to £350.3 million...

  • Page 71
    ... lesser extent, higher price discounting as discussed above. Our focus on acquiring new bundled customers and on cross-selling to existing customers is shown by cable products per customer increasing to 2.47 at December 31, 2009 from 2.41 at December 31, 2008 and by "triple-play" penetration growing...

  • Page 72
    ... a net increase in products of 324,600. December 31, 2009 September 30, 2009 Three months ended June 30, March 31, 2009 2009 December 31, 2008 Opening customers(1) ...Customer additions ...Customer disconnects ...Net customer movement ...Closing customers(1) ...Cable churn(1)(2) ...Cable products...

  • Page 73
    ...000 prepay customers. The growth in contract customers reflects the drive for "quad-play" packages through cross-selling with our cable products. The decline in prepay customers reflects increased competition in the prepay market and our strategy not to focus heavily on retaining market share in the...

  • Page 74
    ...net additions due to the launch of wholesale line rental in August which allows us to offer telephone line rental services bundled with our broadband services, which we believe makes our products more attractive to our customers, and new flexible customer propositions. December 31, 2009 Three months...

  • Page 75
    ... on Virgin Media's cable platform and also by satellite. Some channels are also available on Freeview. We account for our interest in UKTV under the equity method and recognized a share of net income of £16.5 million and £18.7 million in the years ended December 31, 2009 and 2008, respectively...

  • Page 76
    ... 31, 2009 and 2008, respectively, from our investment in our joint venture with Setanta Sports News. Setanta Sports News ceased broadcasting in June 2009 and we are in process of winding up this business. Consolidated Statement of Cash Flows Years Ended December 31, 2010 and 2009 For the year ended...

  • Page 77
    ...year ended December 31, 2009, cash used in investing activities increased to £571.3 million from £467.1 million for the year ended December 31, 2008. The cash used in investing activities in the years ended December 31, 2009 and 2008 mainly represented purchases of fixed assets. Purchases of fixed...

  • Page 78
    ... stock acquired in connection with these programs have been cancelled. As of February 18, 2011, the remaining amount authorized for repurchase under this plan is £213.5 million (or $333.0 million based on the exchange rate at December 31, 2010). Our long term debt has been issued by Virgin Media...

  • Page 79
    ..., or RCF. On April 12, 2010, a term loan B facility, or Tranche B was added to the Senior Facilities Agreement by way of an accession deed between Virgin Media Investment Holdings Limited and Deutsche Bank AG, London Branch. Tranche B has been syndicated to a group of lenders. Our senior credit...

  • Page 80
    ... the Senior Facilities Agreement, the remaining principal payments on our senior credit facility were scheduled as follows (in millions): Date Amount Tranche A June 30, 2011 ...June 30, 2012 ...June 30, 2013 ...June 30, 2014 ...June 30, 2015 ...Tranche B December 31, 2015 ...Total ... £ 150.0 175...

  • Page 81
    ... financial year guarantee the payment of all sums payable under our senior credit facility and such members are required to grant first-ranking security over all or substantially all of their assets to secure the payment of all sums payable under our senior credit facility. Virgin Media Finance PLC...

  • Page 82
    ... (taken together) under the Senior Facilities Agreement to perform and comply with their payment or other material obligations under the Senior Facilities Agreement or related finance documents (taking into account the resources available to the obligors from any other member of the bank group...

  • Page 83
    ... Holdings Inc., Virgin Media (UK) Group, Inc. and Virgin Media Communications Limited and on a senior subordinated basis by VMIH and Virgin Media Investments Limited. In June 2009, Virgin Media Finance issued U.S. dollar denominated 9.50% senior notes due 2016 with a principal amount outstanding...

  • Page 84
    ... scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.'s common stock during at least 20 of the last 30 trading days of...

  • Page 85
    common stock, or a combination of both, at our election, to settle our obligations. We have classified this debt as long-term debt in the consolidated balance sheet as of December 31, 2010 because we determined, in accordance with the Contracts in Entity's own Equity Topic of the FASB ASC, that we ...

  • Page 86
    ... of our long term debt. An increase in interest rates of 1% would increase unhedged gross interest expense by approximately £16.7 million per year. We are also subject to currency exchange rate risks because substantially all of our revenues, operating costs and selling, general and administrative...

  • Page 87
    ... have entered into a number of interest rate swaps to mitigate the risk relating to the variability in future interest payments on our senior credit facility, which accrues interest at variable rates based on LIBOR. For the period July 2012 through December 2015 these interest rate swaps will allow...

  • Page 88
    ... consolidated financial statements of Virgin Media Inc. and "Management's Discussion and Analysis of Financial Condition and Results of Operations-Derivative Instruments and Hedging Activities". The fair market value of long term fixed interest rate debt and the amount of future interest payments on...

  • Page 89
    ... exchange rates (in millions). Year ended December 31, 2012 2013 2014 Fair Value December 31, 2010 2011 2015 Thereafter Total Long term debt (including current portion) U.S. Dollars Fixed rate ...Average interest rate ...Average forward exchange rate ...Euros Fixed rate ...Average interest rate...

  • Page 90
    ... exchange rates (in millions). Year ended December 31, Fair Value December 31, 2009 2010 2011 2012 2013 2014 Thereafter Total Long term debt (including current portion) U.S. Dollars Fixed rate ...Variable rate ...Average interest rate ...Average forward exchange rate ...Euros Fixed rate...

  • Page 91
    ... 2009 and consolidated statements of operations and cash flows for the years ended December 31, 2009 and 2008. The results of operations of Virgin Media TV have been included as discontinued operations in the consolidated statements of operations through July 12, 2010, which is the date the sale was...

  • Page 92
    ...LLP, our registered public accounting firm, regarding internal control over financial reporting of Virgin Media Inc. (c) Management's Annual Report on Internal Control Over Financial Reporting for Virgin Media Investment Holdings Limited Our management is responsible for establishing and maintaining...

  • Page 93
    ... in this annual report. (d) Management's Annual Report on Internal Control Over Financial Reporting for Virgin Media Investments Limited Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Exchange Act Rule...

  • Page 94
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Virgin Media Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the...

  • Page 95
    ... ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference to our Proxy Statement for the 2011 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND...

  • Page 96
    ... Holdings Limited, Virgin Media Investments Limited and Subsidiaries are included in Item 8: Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets-December 31, 2010 and 2009 ...Consolidated Statements of Operations-Years ended December 31, 2010, 2009 and 2008...

  • Page 97
    ...the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Virgin Media Inc. and subsidiaries' internal control over financial reporting as of December 31, 2010, based on criteria established in Internal...

  • Page 98
    ...Long term debt, net of current portion ...Derivative financial instruments ...Deferred revenue and other long term liabilities ...Deferred income taxes ...Total liabilities ...Commitments and contingent liabilities Shareholders' equity Common stock-$0.01 par value; authorized 1,000.0 (2010 and 2009...

  • Page 99
    VIRGIN MEDIA INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (in millions, except per share data) Year ended December 31, 2010 2009 2008 (Adjusted) (Adjusted) Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) ...Selling, general and ...

  • Page 100
    ... cash ...Disposal of businesses, net ...Other ...Net cash used in investing activities ...Financing activities: New borrowings, net of financing fees ...Repurchase of common stock ...Purchase of conversion hedges ...Proceeds from employee stock option exercises ...Principal payments on long term...

  • Page 101
    ... Income (Loss) Net Common Additional Comprehensive Foreign Pension (Losses) Stock $.01 Paid-In Income Currency Liability Gains on Accumulated Par Value Capital (Loss) Translation Adjustments Derivatives Deficit Total Balance, December 31, 2007 ...Exercise of stock options and tax effect ...Stock...

  • Page 102
    ...service and one of the most advanced TV on-demand services available in the U.K. market. As of December 31, 2010, we provided service to approximately 4.8 million residential cable customers on our network. We are also one of the U.K.'s largest mobile virtual network operators by number of customers...

  • Page 103
    ... balance sheet as of December 31, 2009 and consolidated statements of operations, cash flows and shareholders' equity for the years ended December 31, 2009 and 2008. Virgin Media TV's operations have been included in discontinued operations through July 12, 2010, which is the date the sale...

  • Page 104
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) on the estimated fair value amounts. We have based these fair value estimates on pertinent information available to us as of December 31, 2010 and 2009. ...

  • Page 105
    ... connection with the design and installation of our operating network equipment and facilities. Costs associated with initial customer installations, additions of network equipment necessary to enable enhanced services, acquisition of additional fixed assets and replacement of existing fixed assets...

  • Page 106
    ... undiscounted and discounted cash flow analyses are based on a number of estimates and assumptions, including the expected period over which the asset will be utilized, projected future operating results of the asset group, discount rate and long term growth rate. As of December 31, 2010 there were...

  • Page 107
    ... rendered; the price for the service is fixed or determinable; and collectibility is reasonably assured. Revenue is stated net of value added tax, or VAT, collected from customers on behalf of U.K. tax authorities. Consumer Fixed line telephone, cable television and internet revenues are recognized...

  • Page 108
    ... MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) components based on the "residual value" method. The amount of revenue recognized on the delivered component is limited to the amount of cash collected. Business...

  • Page 109
    ... volatility in future cash flows and earnings associated with foreign currency payments in relation to operating costs and purchases of fixed assets incurred in the normal course of business. Our objective in managing exposure to fluctuations in interest rates and foreign currency exchange rates is...

  • Page 110
    ... since the inclusion of such securities is anti-dilutive. The average number of shares outstanding is computed as follows (in millions): Year ended December 31, 2010 2009 2008 Number of shares outstanding at start of period ...Issues of common stock (average number outstanding during the period...

  • Page 111
    ..., 2010 the planned sale met the requirements for Virgin Media TV to be reflected as assets and liabilities held for sale and discontinued operations in both the current and prior years and, accordingly, we adjusted the consolidated balance sheet as of December 31, 2009 and consolidated statements of...

  • Page 112
    ... an equal tax benefit in continuing operations. Revenue of the Virgin Media TV business, reported in discontinued operations, for the years ended December 31, 2010, 2009 and 2008 was £100.1 million, £167.8 million and £147.5 million, respectively. Virgin Media TV's pre-tax income, reported within...

  • Page 113
    ... for sale and discontinued operations in both the current and prior periods and we adjusted the consolidated balance sheet as of December 31, 2008 and consolidated statements of operations and cash flows for the year ended December 31, 2008 accordingly. Revenue of the sit-up business, reported in...

  • Page 114
    ...reduced long term cash flow estimates. As a result, we extended our review to include the valuation of the reporting unit's individual assets and liabilities and recognized a goodwill impairment charge of £39.9 million. During the year ended December 31, 2008, we impaired intangible assets relating...

  • Page 115
    ... Assets (Including Leases) (continued) Future minimum annual payments under capital and operating leases at December 31, 2010 are as follows (in millions). The table reflects our contractual obligations. Capital Leases Operating Leases Year ended December 31, 2011 ...2012 ...2013 ...2014 ...2015...

  • Page 116
    ... and intangible assets not subject to amortization totaling £1,811.6 million and £205.9 million are allocated to our Consumer and Business reporting units, respectively. We performed our annual impairment reviews of our Consumer and Business reporting units as at October 1, 2010 and 2009. As...

  • Page 117
    ... the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the Mobile reporting unit declined as a result of a combination of an increased discount rate, a reduced terminal value multiple and reduced long term cash flow...

  • Page 118
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt Long term debt consists of (in millions): December 31, 2010 December 31, 2009 Secured Obligation U.S. Dollar 6.50% senior secured notes due 2018 ...Senior credit facility ...Euro Senior ...

  • Page 119
    ... scheduled trading date preceding the maturity date. Prior to August 15, 2016, holders may convert their notes, at their option, only under the following circumstances: (i) in any quarter, if the closing sale price of Virgin Media Inc.'s common stock during at least 20 of the last 30 trading days of...

  • Page 120
    ..., certain cash dividends or distributions or stock repurchases where the price exceeds market values. In the event of specified fundamental changes relating to Virgin Media Inc., referred to as "make whole" fundamental changes, the conversion rate will be increased as provided by a formula set forth...

  • Page 121
    ... £191.9 million as of December 31, 2010, has been included as a non-current derivative financial asset in the consolidated balance sheet. The conversion hedges will be recorded at fair value at each reporting period with changes in fair values reported as a loss (gain) on derivative instruments...

  • Page 122
    ...December 31, 2010, we were in compliance with these covenants. The agreements governing the senior secured notes and the senior credit facility significantly restrict the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. In addition, the agreements...

  • Page 123
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt (continued) Long term debt repayments, excluding capital leases, as of December 31, 2010, are due as follows (in millions): Period ending December 31: 2011 ...2012 ...2013 ...2014 ...2015 ...

  • Page 124
    ... volatility of our stock price, the dividend yield on our stock, exchange rates, and counterparty non-performance risk. The table below presents the estimated impact on the December 31, 2010 fair value of a hypothetical 20% increase and decrease in our stock price (holding all other inputs constant...

  • Page 125
    ...risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with recorded asset balances at December 31, 2010. We perform regular reviews of the financial institutions with which we operate...

  • Page 126
    ... swaps and foreign exchange forward rate contracts. We are required to recognize all derivative instruments as either assets or liabilities at fair value on our consolidated balance sheets, and to recognize certain changes in the fair value of derivative instruments in our consolidated statements of...

  • Page 127
    ... balance sheet were as follows (in millions): December 31, 2010 December 31, 2009 Included within current assets: Accounting Hedge Foreign currency forward rate contracts ...Economic Hedge Foreign currency forward rate contracts ...Included within non-current assets: Accounting Hedge Interest rate...

  • Page 128
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 10-Derivative Financial Instruments and Hedging Activities (continued) The terms of our outstanding cross-currency interest rate swaps at December 31, 2010 were as follows: Notional amount due from ...

  • Page 129
    ... convertible senior notes due 2016. Interest Rate Swaps-Hedging of Interest Rate Sensitive Obligations As of December 31, 2010, we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with our senior credit...

  • Page 130
    ... plans are intended to encourage Virgin Media stock ownership by employees and directors so that they may acquire or increase their proprietary interest in our company, to encourage such employees and directors to remain in our employ or service and to put forth maximum efforts for the success...

  • Page 131
    ... fair value of these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions for the years ended December 31, 2010, 2009 and 2008: 2010 Year ended December 31, 2009 2008 Risk-free Interest Rate ...Expected Dividend Yield...

  • Page 132
    ... to the stock incentive plans and the Virgin Media Sharesave Plan and of the changes during the year ended December 31, 2010, is provided below. Stock Incentive Plans Non-performance Performance Based Based Weighted Average Excise Price Virgin Media Sharesave Plan Total Outstanding-beginning of...

  • Page 133
    ... value of the proportion of restricted stock units subject to the TSV performance measure as of the grant date. Year ended December 31, 2010 Risk-free Interest Rates ...Expected Dividend Yield ...Expected Volatility of Virgin Media Shares ...Expected Volatility of Selected Comparator Group Shares...

  • Page 134
    ... stock units that vested during the years ended December 31, 2010, 2009, 2008 had total fair values of £1.8 million, £0.7 million and nil, respectively. Note 12-Employee Benefit Plans Defined Benefit Plans Certain of our subsidiaries operate defined benefit pension plans in the U.K. The assets...

  • Page 135
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 12-Employee Benefit Plans (continued) Obligations and Funded Status The change in projected benefit obligation was as follows (in millions): Year ended December 31, 2010 2009 Benefit obligation at ...

  • Page 136
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 12-Employee Benefit Plans (continued) As at December 31, 2010 and 2009, all pension plans had projected benefit obligations in excess of plan assets. The following table presents information for pension ...

  • Page 137
    ... were as follows: December 31, 2010 2009 Discount rate ...Expected long term rate of return on plan assets ...Rate of compensation increase ... 5.75% 6.50% 4.00% 5.75% 5.92% 3.00% Where investments are held in bonds and cash, the expected long term rate of return is taken to be yields generally...

  • Page 138
    ...the funding position. There were no directly owned shares of our common stock included in the equity securities at December 31, 2010 or 2009. Estimated Future Benefit Payments The benefits expected to be paid out of the pension plans in total are set out below for each of the next five years and the...

  • Page 139
    ...lease and contract exit costs in connection with the restructuring program initiated in 2008 as discussed below. The lease and contract exit costs recorded during 2010 primarily relate to payments to exit the long term property leases for our main London office. During the fourth quarter of 2008, we...

  • Page 140
    VIRGIN MEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 14-Income Taxes The benefit (expense) for income taxes consists of the following (in millions): Year ended December 31, 2010 2009 2008 Current: Federal ...State and local ...Foreign ...Total current ......

  • Page 141
    ... tax rate from 28% in 2010, to 27% with effect from 1 April 2011. The deferred tax assets and liabilities presented for 2010 reflect the 27% rate. Further rate changes have been announced that are expected to reduce the UK corporate income tax rate in equal annual decrements of one percentage point...

  • Page 142
    ...the merger with Telewest. At December 31, 2010, we had fixed assets on which future U.K. tax deductions can be claimed of £13.0 billion. The maximum amount that can be claimed in any one year is 20% of the remaining balance, after additions, disposals and prior claims. This rate is expected to fall...

  • Page 143
    ...to use the "Virgin" name for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes...

  • Page 144
    ... UKTV joint venture companies as related parties to us. We also carry the UKTV channels in our pay television packages available to our customers. As at December 31, 2010 and 2009, included in the balance sheet were amounts related to our share of net assets, loans receivable, redeemable preference...

  • Page 145
    ... 8.2 8.1 Future payments of regular quarterly dividends by us are at the discretion of our Board of Directors and will be subject to our future needs and uses of cash, which could include investments in operations, the repayment of debt, and share repurchase programs. In addition, the terms of our...

  • Page 146
    ...open market repurchases. The shares of common stock acquired in connection with this program were cancelled. As at December 31, 2010, the remaining amount authorized under the share repurchase program was £213.5 million. No shares of common stock were repurchased in the year ended December 31, 2009...

  • Page 147
    ... fixed line telephone services to residential customers outside of our cable network, and the provision of mobile telephony and mobile broadband to residential customers. Our Business segment comprises our operations carried out through Virgin Media Business which provides voice, data and internet...

  • Page 148
    ...reporting since the primary asset of the business is the cable network infrastructure, which is shared by our Consumer and Business segments. The 2008 fiscal year amounts have been adjusted to conform to the current period presentation. Segment information for the years ended December 31, 2010, 2009...

  • Page 149
    ... Finance. December 31, 2010 Virgin Media Finance Other guarantors All other subsidiaries Adjustments Balance sheets Company VMIH VMIL (in millions) Total Cash and cash equivalents . . £ 101.3 £ Restricted cash ...- Other current assets ...0.4 Total current assets ...Fixed assets, net ...Good...

  • Page 150
    ... 31, 2009 Virgin Media Finance Other guarantors All other VMIH VMIL subsidiaries Adjustments (Adjusted) (in millions) Balance sheets Company Total Cash and cash equivalents ...£ Restricted cash ...Other current assets ...Current assets held for sale ...Total current assets ...Fixed assets, net...

  • Page 151
    ...-Condensed Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2010 Virgin Media Other All other Company Finance guarantors VMIH VMIL subsidiaries Adjustments (in millions) Statements of operations Total Revenue ...£ - £ Operating costs ...- Selling, general and...

  • Page 152
    ... Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2009 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (Adjusted) (in millions) Statements of operations Total Revenue ...£ - £ Operating costs ...- Selling, general...

  • Page 153
    ... Consolidating Financial Information-Senior Notes (continued) Year ended December 31, 2008 Virgin Media Other All other Company Finance guarantors VMIH subsidiaries Adjustments (Adjusted) (in millions) Statements of operations Total Revenue ...£ - £ Operating costs ...- Selling, general...

  • Page 154
    ...net ...- - Other ...- - Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Common stock repurchases ...Purchase of conversion hedges ...Proceeds from employee stock option exercises ...Principal payments on long term debt and capital...

  • Page 155
    ... downs on loans to group companies ...Disposal of businesses, net ...Other ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing activities . . Proceeds from employee stock option exercises ...Principal payments on long term debt, including...

  • Page 156
    ...downs) repayments on loans to group companies ...(477.3) - Other ...- - Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing activities ...Proceeds from employee stock option exercises ...Principal payments on long term debt and capital leases...

  • Page 157
    ... 31, 2010 Virgin Media Secured Finance PLC Balance sheets Company NonGuarantors Guarantors (in millions) Adjustments Total Cash and cash equivalents ...Restricted cash ...Other current assets ...Total current assets ...Fixed assets, net ...Goodwill and intangible assets, net ...Investments in...

  • Page 158
    ...) December 31, 2009 Virgin Media Secured Finance PLC Balance sheets Company NonGuarantors Guarantors (Adjusted) (in millions) Adjustments Total Cash and cash equivalents ...Restricted cash ...Other current assets ...Current assets held for sale ...Total current assets ...Fixed assets, net...

  • Page 159
    ...) Note 20-Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2010 Virgin Media Secured Finance PLC Statements of operations Company NonGuarantors Guarantors (in millions) Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 160
    ...-Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2009 Virgin Media Secured Finance PLC Statements of operations Company NonGuarantors Guarantors (Adjusted) (in millions) Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 161
    ...-Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2008 Virgin Media Secured Finance PLC Statements of operations Company NonGuarantors Guarantors (Adjusted) (in millions) Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 162
    ... on loans to equity investments ...Principal drawdowns (repayments) on loans to group companies ...Decrease in restricted cash ...Disposal of businesses, net ...Other ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of Financing fees ...Common stock...

  • Page 163
    ...) drawdowns on loans to group companies ...Disposal of businesses, net ...Other ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term debt, including...

  • Page 164
    ... ...Principal (repayments) drawdowns on loans to group companies ...Other ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term debt and capital leases...

  • Page 165
    ... 31, 2010 Virgin Media Secured Finance PLC Balance sheets Company NonGuarantors Guarantors (in millions) Adjustments Total Cash and cash equivalents ...Restricted cash ...Other current assets ...Total current assets ...Fixed assets, net ...Goodwill and intangible assets, net ...Investments in...

  • Page 166
    ...) December 31, 2009 Virgin Media Secured Finance PLC Balance sheets Company Guarantors NonGuarantors Adjustments Total (in millions) Cash and cash equivalents ...Restricted cash ...Other current assets ...Current assets held for sale ...Total current assets ...Fixed assets, net ...Goodwill...

  • Page 167
    ... (continued) Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2010 Virgin Media Secured Finance PLC NonGuarantors Guarantors (in millions) Statements of operations Company Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 168
    ... (continued) Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2009 Virgin Media Secured Finance PLC Statements of operations Company NonGuarantors Guarantors (in millions) Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 169
    ... (continued) Condensed Consolidating Financial Information-Senior Secured Notes (continued) Year ended December 31, 2008 Virgin Media Secured Finance PLC Statements of operations Company NonGuarantors Guarantors (in millions) Adjustments Total Revenue ...Operating costs ...Selling, general and...

  • Page 170
    ....4 Other ...- - - 1.4 Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Common stock repurchases ...Purchase of conversion hedges ...Proceeds from employee stock option exercises ...Principal payments on long term debt and capital...

  • Page 171
    ...) drawdowns on loans to group companies ...Disposal of businesses, net ...Other ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term debt, including...

  • Page 172
    ... (repayments) drawdowns on loans to group companies ...Purchase of investments ...Net cash (used in) provided by investing activities ...Financing activities: New borrowings, net of financing fees ...Proceeds from employee stock option exercises ...Principal payments on long term debt and capital...

  • Page 173
    ...Fixed assets, net ...Investments in and loans to affiliates, net ...Other assets, net ...Total assets ...Liabilities and shareholders' equity Current liabilities ...Long term debt ...Other long term liabilities ...Shareholders' equity Common stock-$0.01 par value; authorised 1.000.0 (2010 and 2009...

  • Page 174
    VIRGIN MEDIA INC. FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF OPERATIONS (in millions) Year ended December 31, 2010 2009 2008 Costs and expenses General and administrative expenses ...Operating loss ...Other income (expense) Interest expense ...Loss in derivative instruments ...Foreign ...

  • Page 175
    VIRGIN MEDIA INC. FINANCIAL INFORMATION OF REGISTRANT STATEMENT OF CASH FLOWS (in millions) Year ended December 31, 2010 2009 2008 Net cash used in operating activities ...Investing activities Principal drawdowns (repayments) on loans to group companies ...Net cash provided by (used in) investing ...

  • Page 176
    ... net loss using the equity method of accounting. The financial statements should be read in conjunction with our consolidated financial statements. Note 2-Other No cash dividend was paid to the registrant by subsidiaries for the years ended December 31, 2010, December 31, 2009 and December 31, 2008...

  • Page 177
    ... statements referred to above present fairly, in all material respects, the consolidated financial position of Virgin Media Investment Holdings Limited and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years...

  • Page 178
    ... financial position of Virgin Media Investments Limited and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting...

  • Page 179
    ... MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2010 December 31, 2009 (Adjusted) Assets Current assets Cash and cash equivalents ...Restricted cash ...Accounts receivable-trade, less allowances for doubtful accounts...

  • Page 180
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) Year ended December 31, 2010 2009 2008 (Adjusted) (Adjusted) Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below) ...Selling, general and ...

  • Page 181
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year ended December 31, 2010 2009 2008 (Adjusted) (Adjusted) Operating activities: Net loss ...(Income) loss from discontinued operations ...Loss from continuing operations ...Adjustments to...

  • Page 182
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Net Share Capital Comprehensive Foreign Pension (Losses) £0.001 Par Value Additional Paid-In Income Currency ...

  • Page 183
    ...due to group companies ...Derivative financial instruments ...Deferred revenue and other long term liabilities ...Deferred income taxes ...Total liabilities ...Commitments and contingent liabilities Shareholder's equity ...Common stock-£1.0 par value; issued and outstanding 2.5 (2010) and 1.0 (2009...

  • Page 184
    VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions) Year ended December 31, 2010 2009 2008 (Adjusted) (Adjusted) Revenue ...Costs and expenses Operating costs (exclusive of depreciation shown separately below ) ...Selling, general and administrative...

  • Page 185
    ... investments ...Decrease in restricted cash ...Disposal of businesses, net ...Investments and loans from parent and subsidiary companies ...Other ...Net cash provided by (used in) investing activities ...Financing activities: New borrowings, net of financing fees ...Principal payments on long term...

  • Page 186
    VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in millions, except share data) Accumulated Other Comprehensive Income (Loss) Net Common Additional Comprehensive Foreign Pension (Losses) Stock £1.0 Paid-In Income Currency Liability Gains on ...

  • Page 187
    ...service and one of the most advanced TV on-demand services available in the U.K. market. As of December 31, 2010, we provided service to approximately 4.8 million residential cable customers on our network. We are also one of the U.K.'s largest mobile virtual network operators by number of customers...

  • Page 188
    ... balance sheet as of December 31, 2009 and consolidated statements of operations, cash flows and shareholders' equity for the years ended December 31, 2009 and 2008. Virgin Media TV's operations have been included in discontinued operations through July 12, 2010, which is the date the sale...

  • Page 189
    ... share in the earnings and losses of the companies in which we have an investment and such investments are generally reflected in the consolidated balance sheet at historical cost. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates...

  • Page 190
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) on translation of our net equity investments in subsidiaries having ...

  • Page 191
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Fixed Assets Depreciation is computed by the straight-line method over the estimated useful...

  • Page 192
    ... undiscounted and discounted cash flow analyses are based on a number of estimates and assumptions, including the expected period over which the asset will be utilized, projected future operating results of the asset group, discount rate and long term growth rate. As of December 31, 2010 there were...

  • Page 193
    ... rendered; the price for the service is fixed or determinable; and collectibility is reasonably assured. Revenue is stated net of value added tax, or VAT, collected from customers on behalf of U.K. tax authorities. Consumer Fixed line telephone, cable television and internet revenues are recognized...

  • Page 194
    ... values. Our bundled arrangements for our business customers do not generally have separately identifiable units of accounting. Revenues from installation services not considered to represent a separate unit of accounting are recognized over the expected life of the customer. Subscriber Acquisition...

  • Page 195
    ... volatility in future cash flows and earnings associated with foreign currency payments in relation to operating costs and purchases of fixed assets incurred in the normal course of business. Our objective in managing exposure to fluctuations in interest rates and foreign currency exchange rates is...

  • Page 196
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 2-Significant Accounting Policies (continued) Leases Our leasing activities are principally related to administrative ...

  • Page 197
    ... and cash flows for the years ended December 31, 2009 and 2008. We have also entered into a number of agreements providing for the carriage by us of certain of BSkyB's standard and high-definition channels along with the former Virgin Media TV channels sold. The agreements in respect to the sale of...

  • Page 198
    ... FINANCIAL STATEMENTS (continued) Note 4-Disposals (continued) Revenue of the Virgin Media TV business, reported in discontinued operations, for the years ended December 31, 2010, 2009 and 2008 was £100.1 million, £167.8 million and £147.5 million, respectively. Virgin Media TV's pre-tax income...

  • Page 199
    ... sit-up was limited to the loan note and carriage agreement and is therefore not considered significant. The loan note was repaid during the year ended December 31, 2009. As at December 31, 2008, we performed an interim goodwill impairment review of our sit-up reporting unit. In September 2008, we...

  • Page 200
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 5-Fixed Assets (Including Leases) Fixed assets consist of (in millions): December 31, 2010 Useful Economic Life Under Capital Leases 2009...

  • Page 201
    ...INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 5-Fixed Assets (Including Leases) (continued) Future minimum annual payments under capital and operating leases at December 31, 2010...

  • Page 202
    ... and intangible assets not subject to amortization totaling £1,819.8 million and £206.8 million are allocated to our Consumer and Business reporting units, respectively. We performed our annual impairment reviews of our Consumer and Business reporting units as at October 1, 2010 and 2009. As...

  • Page 203
    ... the prior year primarily as a result of declining market multiples of comparable companies. The income approach valuations in respect of the Mobile reporting unit declined as a result of a combination of an increased discount rate, a reduced terminal value multiple and reduced long term cash flow...

  • Page 204
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt Long term debt consists of (in millions): December 31, 2010 VMIH VMIL December 31, 2009 VMIH VMIL ...

  • Page 205
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt (continued) The effective interest rate on the senior credit facility was 4.2% and 5.3% as at December 31, 2010 and 2009...

  • Page 206
    ... INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt (continued) On May 12, 2010, we redeemed in full the outstanding balance of our senior notes due 2014 using cash...

  • Page 207
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 8-Long Term Debt (continued) • • merge or consolidate or transfer all or substantially all of our assets; and enter...

  • Page 208
    ... INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 9-Fair Value Measurements (continued) transactions in either the listed or over-the counter markets, adjusted for non-performance...

  • Page 209
    ...risk with respect to derivative contracts are focused within a limited number of international financial institutions with which we operate and relate only to derivatives with recorded asset balances at December 31, 2010. We perform regular reviews of the financial institutions with which we operate...

  • Page 210
    ..., cash collateral with any counterparty. The fair values of our derivative instruments recorded on our consolidated balance sheet were as follows (in millions): December 31, 2010 December 31, 2009 Included within current assets: Accounting Hedge Foreign currency forward rate contracts ...Economic...

  • Page 211
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 10-Derivative Financial Instruments and Hedging Activities (continued) Cross-Currency Interest Rate Swaps-Hedging the ...

  • Page 212
    ...the $1,000 million senior notes due 2016. Interest Rate Swaps-Hedging of Interest Rate Sensitive Obligations As of December 31, 2010, we had outstanding interest rate swap agreements to manage the exposure to variability in future cash flows on the interest payments associated with our senior credit...

  • Page 213
    ... months, the amount of pre-tax losses that would be reclassified from other comprehensive income to earnings would be nil, £1.9 million and nil relating to interest rate swaps, cross-currency interest rate swaps and forward foreign exchange contracts, respectively. Note 11-Employee Benefit Plans...

  • Page 214
    ... VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 11-Employee Benefit Plans (continued) Obligations and Funded Status The change in projected benefit obligation was as follows (in millions): Year ended December 31, 2010 2009...

  • Page 215
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 11-Employee Benefit Plans (continued) As at December 31, 2010 and 2009, all pension plans had projected benefit ...

  • Page 216
    ... were as follows: December 31, 2010 2009 Discount rate ...Expected long term rate of return on plan assets ...Rate of compensation increase ... 5.75% 5.75% 6.50% 5.92% 4.00% 3.00% Where investments are held in bonds and cash, the expected long term rate of return is taken to be yields generally...

  • Page 217
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 11-Employee Benefit Plans (continued) December 31, 2009 Fair value hierarchy Level 1 Level 2 Level 3 Asset category ...

  • Page 218
    ... MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 12-Restructuring and other charges Restructuring and other charges in the year to December 31, 2010, 2009 and 2008 related...

  • Page 219
    ... HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 13-Income Taxes The benefit for income taxes consists of the following (in millions): Year ended December 31, 2010 2009 2008 Current...

  • Page 220
    VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 13-Income Taxes (continued) Deferred income taxes reflect the net tax effects of temporary differences between the ...

  • Page 221
    ...the merger with Telewest. At December 31, 2010, we had fixed assets on which future U.K. tax deductions can be claimed of £12.6 billion. The maximum amount that can be claimed in any one year is 20% of the remaining balance, after additions, disposals and prior claims. This rate is expected to fall...

  • Page 222
    .... Virgin Entertainment Investment Holdings Limited became a holder of Virgin Media Inc's common stock as a result of its acquisition of Virgin Mobile on July 4, 2006. As of December 31, 2010, Virgin Entertainment Investment Holdings Limited beneficially owned 4.8% of Virgin Media Inc.'s common stock...

  • Page 223
    ...to use the "Virgin" name for the TV, broadband internet, telephone and mobile phone services we provide to our residential customers, as well as the acquisition and branding of sports, movies and other premium television content and the sale of certain communications equipment, such as set top boxes...

  • Page 224
    ... MEDIA INVESTMENT HOLDINGS LIMITED AND SUBSIDIARIES VIRGIN MEDIA INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 14-Related Party Transactions (continued) During the years ended December 31, 2010, 2009 and 2008, we received cash payments...

  • Page 225
    ... and fixed line telephone services to residential customers on its cable network, the provision of broadband and fixed line telephone services to residential customers outside of its cable network, and the provision of mobile telephony and broadband to residential customers. Virgin Media's Business...

  • Page 226
    ... INVESTMENTS LIMITED AND SUBSIDIARIES COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Note 16-Industry Segments (continued) The following segment information is based on the consolidated results of Virgin Media, VMIH and VMIL for the years ended December 31, 2010, 2009 and 2008...

  • Page 227
    ... Officer VIRGIN MEDIA INVESTMENT HOLDINGS LIMITED By: /S/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer Date: February 22, 2011 By: /S/ EAMONN O'HARE Eamonn O'Hare Chief Financial Officer VIRGIN MEDIA INVESTMENTS LIMITED By: /S/ NEIL A. BERKETT Neil A. Berkett Chief Executive Officer Date...

  • Page 228
    ...Chief Executive Officer and Director (principal executive officer) Chief Financial Officer and Director (principal financial officer) Vice President-Controller (principal accounting officer) Director Director Director Director Director Director Director Director Director Director February 22, 2011...

  • Page 229
    ... M. Mackenzie Chief Executive Officer (principal executive officer) Chief Financial Officer (principal accounting and financial officer) Director Director February 22, 2011 February 22, 2011 By: By: By: February 22, 2011 February 22, 2011 VIRGIN MEDIA INVESTMENTS LIMITED Name Title Date By...

  • Page 230
    ...Exchange Commission on February 26, 2010). Memorandum and Articles of Association of Virgin Media Investments Limited. High Yield Intercreditor Deed, dated April 13, 2004, as amended and restated on December 30, 2009, among Virgin Media Finance PLC as Issuer, Virgin Media Investment Holdings Limited...

  • Page 231
    ... Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on April 16, 2008). Indenture, dated as of June 3, 2009, among Virgin Media Inc., Virgin Media Finance PLC, Virgin Media Group LLC, Virgin Media Holdings Inc., Virgin Media (UK) Group, Inc., Virgin...

  • Page 232
    ... 4.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on January 20, 2010). First Supplemental Indenture, dated as of April 19, 2010, among Virgin Media SFA Finance Limited, Virgin Media Secured Finance PLC and The Bank of New York Mellon as...

  • Page 233
    ...2011, among Virgin Media Secured Finance PLC, Telewest Communications Holdings Limited and The Bank of New York Mellon as trustee. Registration Rights Agreement, dated as of January 19, 2010, among Virgin Media Secured Finance PLC, Virgin Media Inc., Virgin Media Finance PLC, Virgin Media Investment...

  • Page 234
    ... Exchange Commission on June 30, 2010). Senior Facilities Agreement, dated March 16, 2010, as amended and restated on March 26, 2010 and February 15, 2011, among Virgin Media Inc. as Ultimate Parent, Virgin Media Finance PLC as Parent, Virgin Media Investment Holdings Limited, Virgin Media Limited...

  • Page 235
    ...2010). Form of Restricted Stock Unit Agreement used for grants by Virgin Media Inc. to its executive officers pursuant to the 2009-2011 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange...

  • Page 236
    ...10.2 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on June 16, 2009). Form of Incentive Stock Option Notice used for grants by Virgin Media Inc. to its executive officers pursuant to the 2009-2011 Long Term Incentive Plan (Incorporated by...

  • Page 237
    ...Inc. 2011-2013 Long Term Incentive Plan. Form of Incentive Stock Option Notice used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan. Form of Performance Share Agreement used for grants made under the Virgin Media Inc. 2011-2013 Long Term Incentive Plan. Form of Company...

  • Page 238
    ... Quarterly Report on Form 10-Q of Virgin Media Inc. as filed with the Securities and Exchange Commission on August 4, 2010). Amendment Letter, dated December 8, 2010, between Virgin Media Inc. and Neil A. Berkett relating to the Service Agreement, dated as of July 3, 2009. Restricted Stock Agreement...

  • Page 239
    ...10.2 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on March 3, 2010). Service Agreement, dated as of July 31, 2009, between Virgin Media Limited and Paul Buttery. (Incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10...

  • Page 240
    ... Stock Option Notice (to be used for Bryan H. Hall) (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on January 18, 2011). Service Agreement, dated as of July 31, 2009, between Virgin Media Limited...

  • Page 241
    ... Virgin Enterprises Limited and Virgin Media Limited dated December 16, 2009 (Incorporated by reference to Exhibit 10.83 to the Annual Report on Form 10-K of Virgin Media Inc. as filed with the Securities and Exchange Commission on February 26, 2010). Letter Agreement, dated as of April 3, 2006...

  • Page 242
    ... Information Virgin Media Inc. NASDAQ London Stock Exchange: VMED www.virginmedia.com Corporate Headquarters Virgin Media Inc. 909 Third Avenue Suite 2863 New York, NY 10022 United States Tel: +1 212 906 8440 Head Office Media House Bartley Wood Business Park Hook Hampshire RG27 9UP United Kingdom...

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